Tax credits for homeowners in city are well-kept secret

Frustration: A recent report finds that the many programs meant to reward residents who take on home renovation are sadly lacking in marketing and coordination.

Urban Chronicle

July 11, 2002|By Eric Siegel | Eric Siegel,SUN STAFF

MY NEXT-DOOR neighbor, a relative newcomer to Baltimore, didn't know about the availability of state and local tax credits for homeowners in certain areas of the city who renovate their houses. Neither did a friend, a long-term resident of the city, who is about to embark on her second substantial home renovation in the last few years.

For all the reporting on the city I've done over the last 25 years, I'm not sure I would have made the connection between tax breaks and rehab work had not the contractor I hired to gut and restore my second-floor bathroom mentioned it to me.

All this is by way of introduction to a new report on Baltimore's homeownership tax-credit programs.

The report by AB Associates, a local private planning firm headed by the city's former deputy planning director, Alfred W. Barry III, asks a simple question: Do the city's tax-credit programs fully support and stimulate homeownership by attracting new residents and helping to retain existing ones?

It also offers a simple answer: No.

The problem, the report concludes, is not so much with the programs themselves, but with their lack of marketing and centralized administration.

"The reaction [to the report] is sort of a feeling of frustration," said Karen M. Footner, executive director of the Baltimore Efficiency and Economy Foundation, a local nonprofit that reviews government operations and commissioned the study. "Until you administer the programs in a coordinated fashion and let people know they exist, they're kind of a wasted resource."

The subject is technical but not trivial, as the city struggles to regain its footing after the huge loss of population over the last 50 years.

Because the report focuses on city programs, it doesn't analyze the state's rehabilitation tax-credit program. The state program -- scaled down this year by the General Assembly because of concerns about the cost of commercial and apartment renovations -- now offers income tax breaks to homeowners in historic districts equal to 20 percent of the cost of renovations. So, for example, an eligible $10,000 rehab could result in a credit against state income taxes of $2,000. (Federal historic tax credits are not available to owners of single-family homes.)

Last year, the Maryland Historical Trust approved 29 completed rehab projects of city homeowners worth a total of $1.98 million -- an average of just over $68,000 per project. Given that rehabs of $5,000 and up are eligible, it would seem that a lot of homeowners aren't applying.

The AB Associates report does note that, in many instances, the value of the state income tax credit was greater than the value of the city's programs, which offer credits against property taxes. And the report recommends that city and state agencies meet annually to review and coordinate their tax credit programs.

Most of the report is taken up with an assessment of -- and recommendations for -- a handful of programs enacted in the mid-1990s. They range from the Newly Constructed Dwellings Tax Credit, which provides a five-year property tax credit beginning at 50 percent in the first year for new homes or ones that have been vacant for a year, to the Waverly Stabilization Tax Credit, which provides property and state income tax credits to homebuyers in the northeast neighborhood as part of a state pilot program.

The report found that the use of the credits varied. In five years, for example, 629 houses with accumulated tax credits of $1.4 million were approved under the New Dwellings Tax Credit; in roughly the same period of time, the Waverly credit went to 61 homeowners, for a total of just less than $25,000.

But it said there was a consensus among real estate professionals, city officials and others that "a general lack of marketing and administrative support" were the primary obstacles preventing tax-credit programs "from realizing their effectiveness as a revitalization tool, a promotional tool and an economic stimulus."

One recommendation in the report is to use as a primary public contact for all the tax-credit initiatives the Live Baltimore Marketing Center, a nonprofit that promotes city living, and to designate one city agency to deal with the center. Live Baltimore was singled out for its Web site, which contains information on state and city programs, and for its development of a database that allows searching by addresses for properties eligible for historic credits.

(Live Baltimore's Web site is Other information is available at the Maryland Historical Trust, www.marylandhistorical and from the city's Commission on Historical & Architectural Preservation,

Another suggestion is to package the credits with grants and loans to make home improvements, broadening their appeal to lower-income homeowners. A third is to more widely distribute information by postings on city Web sites and inserts in tax bills.

The latter, in particular, might appeal to my neighbor and my friend.

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